This is a hard point to put now-a-days, when games seemingly must have super HD graphics to be considered looking good, but I will try. In short I can put it as this: if you play an old game, for example Super Mario Bros. 3 or why not Tetris, for 20-30 minutes it is most likely that you will forget that the graphics are “bad” or not HD. The same actually happens if you play a new game with ultra-graphics; after playing for about 20-30 minutes you are most likely to have been so immersed in the game that you don’t actively care about the graphics anymore.
The reason behind this is some kind of immersion effect that happens when we watch a screen (or other static object) for a while. The screen’s content is not static but the screen itself is static, i.e. being in the same position all the time. Think of when you are watching a movie, after 20-30 minutes you most likely just see the screen; everything else around the screen, although physically still in your visual field, is somehow removed from the visual processing, making your mind/brain to focus exclusively on the screen and everything that happens there. I believe that when this happen our brains also stops “caring” about the quality of the output from the screen, i.e. have you reached this state of immersion you have overcome “the hurdles” of quality of the output from the screen and your mind does only care for the continuation of the visual input from the screen, not details of graphics or other screen disturbances that might have annoyed you during the first 20-30 minutes.
I want to make this point in a small but important effort to reduce the focus that most gamers seem to have on graphics (and to some extent “computational power” of the console/computer). If a game have a good story, atmosphere, game play and easy input then it is most likely you have a great game in your hands, no matter the graphics. I will take the most recent Zelda game as an example. The Legend of Zelda: Skyward Sword scored 9 or 10 on many review sites and magazines, even though the graphics is far from the most advanced today. This point is also for developers, who seem to push too much of its budget into building super advanced physics / graphics engines, while not caring as much for story, atmosphere and other important things in the games. From my point of view, it all boils down to this: if you produce a game which has extremely good graphics, super-HD, cannot distinguish from reality almost, but the story is crap or you can hardly control the game in a natural way, it will not fare good! Vice versa, if you have a game which graphics looks five-six years old, but the story is incredible and the atmosphere engulfs you after a few seconds you are most likely to have a million-seller in your hands, since most players and reviewers alike will forget about the graphics, perhaps after a few initial “Huh, that looks old!”; but after being immersed like described above, the overall feeling of the game will remove the “need” of HD-graphics.
All this said, I might sound like a person who doesn’t appreciate nice looking games. Of course I do, but not to that extent that the graphics is the most important feature of a game. Bastion, one of the best games of 2011, was extremely beautiful in my eyes, even though it didn’t have an advanced engine backing it up; it was more about the overall feeling of the game. The story and atmosphere really blended well with the layout of the game, thus removing the demand for a very realistic graphic engine. Occasionally, nice graphics can in fact (of course) add something to the atmosphere, if it is used in a good way. As an example I again turn to my love-hate game Dark Souls, where I think the view from some vantage points in fact were amazingly beautiful, as if you were gazing out from real lookout points over vast, fantastic sites or abysses hidden under the earth. The same goes for Crysis 2 with its superb graphics which made you feel you really were hunting down aliens in New York.
Don’t emphasize too much on the graphics, integrate it well with the story (if any), the atmosphere and playability of the game then a balance should be possible. Exaggerate the “skin” of the game and you might end up with a very beautiful but cold and dead experience!